Avoiding Misrepresentation: How To Guide for Real Estate Agents

The line between effective marketing and misrepresentation in real estate can be surprisingly thin—and crossing it can cost you your career. A single oversight can lead to costly legal battles. Attorney fees alone can quickly amount to $10,000 or more in an E&O claim, even before any settlements or judgments. Understanding what constitutes misrepresentation isn’t just about ethics; it’s about protecting your livelihood.

Whether you’re a seasoned agent or new to the industry, this comprehensive guide will help you navigate the complex landscape of MLS listings, property photography, and marketing materials while staying firmly on the right side of the law.

What Constitutes Misrepresentation in Real Estate?

Misrepresentation in real estate occurs when an agent provides false, misleading, or materially inaccurate information about a property that influences a buyer’s decision. Unlike “puffing”—subjective opinions like “charming” or “cozy”—misrepresentation involves concrete, verifiable facts that can be proven false.

The Three Types of Misrepresentation

1. Innocent Misrepresentation This occurs when an agent unknowingly provides incorrect information. While intent matters legally, innocent misrepresentation can still result in liability and damaged relationships.

Example: An agent lists a home as having 2,400 square feet based on tax records, but a post-closing appraisal reveals the actual size is 2,100 square feet due to outdated county records. The agent had no knowledge the information was incorrect.

2. Negligent Misrepresentation
This happens when an agent fails to exercise reasonable care in verifying information. Even without malicious intent, negligence can lead to significant legal consequences.

Example: An agent notices water stains on basement walls during a showing but fails to investigate or disclose potential moisture issues. And/or fails to recommend a building inspection. Later, buyers discover extensive mold damage that a reasonable inspection would have revealed.

3. Fraudulent Misrepresentation The most serious form involves deliberately providing false information with intent to deceive. This can result in criminal charges, license revocation, and substantial financial penalties.

Example: An agent knows the seller never obtained permits for a finished basement conversion but deliberately lists it as “4th bedroom” and tells buyers it was “professionally finished” to increase the sale price.

Common Areas Where Misrepresentation Occurs

Property Specifications and Measurements

Square Footage Errors: One of the most litigated areas in real estate misrepresentation involves inaccurate square footage. Property tax rolls may not be up-to-date if there were additions that added to the total home square footage, and providing inaccurate or conflicting square footage can lead to lawsuits.

Best Practice: Always verify square footage through multiple sources:

Professional appraisals
Builder’s original plans
Recent survey documents
Personal measurement verification
Professional Floorplans

Proactive Solution: When discrepancies exist between actual square footage and tax records, work with sellers to correct the tax assessor’s files before listing. This process typically takes 30-60 days but prevents post-closing disputes and ensures accurate property valuations for tax purposes.

Lot Size and Boundaries Property boundary disputes can be costly and emotionally charged. Never estimate lot sizes or assume property lines without proper documentation. When in doubt, sellers should have a professional survey done.

Room Counts and Classifications Bedrooms must meet local building codes for egress, ceiling height, and square footage. A “bonus room” isn’t automatically a bedroom, regardless of how the seller uses it.

Property Condition and Disclosures

Structural Issues While agents aren’t required to be structural engineers, knowingly concealing or misrepresenting known defects crosses the line into fraudulent misrepresentation.

Environmental Concerns Lead paint, asbestos, mold, and flood history must be accurately disclosed based on available information and local requirements.

Key Federal Laws: The Residential Lead-Based Paint Hazard Reduction Act requires disclosure of known lead paint in homes built before 1978. The National Flood Insurance Act mandates flood zone disclosure in participating communities.

State Variations: California’s Environmental Quality Act requires extensive environmental disclosures, while states like Texas and Florida have specific mold disclosure requirements. Always check your state’s environmental disclosure statutes.

Renovations and Permits Unpermitted work is a significant liability. Always verify that major renovations were properly permitted and inspected.

HOA and Community Information

HOA Fees and Special Assessments Current and accurate HOA information is crucial. Special assessments can significantly impact a buyer’s financial planning.

Current National Issues: HOA fees have increased nationally by 5.7% year-over-year, with some regions experiencing double-digit increases. Natural disasters such as fires, tornadoes, and floods can cause unanticipated major damage to common areas, leading to unexpected special assessments.

Florida’s Post-Surfside Crisis: Following the 2021 Surfside collapse, Florida law now requires all three-story-plus condo buildings at least 30 years old to undergo mandatory engineering assessments by Dec. 31, 2024. Special assessment fees to catch up with deferred maintenance can be significant per unit owner, creating absolute disclosure obligations for agents representing condo properties.

Community Amenities Only include amenities that are actually available to residents. Planned amenities should be clearly identified as such.

Municipal vs. Private Distinctions: Clearly differentiate between amenities available to all municipal residents (public parks, libraries, beaches) versus HOA-exclusive amenities (pools, fitness centers, golf courses). Exercise caution when mentioning private clubs or country clubs in marketing materials—these typically require separate membership fees, applications, and have no guarantee of admission. Always specify “membership available” rather than implying automatic access.

The Photography Minefield: Visual Misrepresentation

With 87% of buyers starting their home search online, photography plays a crucial role in marketing properties. However, enhanced images can cross the line into misrepresentation.

Acceptable Photo Enhancements

HDR and Exposure Correction Professional photographers can use HDR photo editing technology to make views outside windows clearer, but the goal should be accurately representing what the eye would see.

Color and Brightness Adjustments Minor adjustments to compensate for lighting conditions are generally acceptable, provided they don’t materially alter the property’s appearance.

Grey Area Retouching Guidelines The “cost test” is key: if achieving what’s shown in the photo would require the buyer to spend money, it’s prohibited. Acceptable seasonal adjustments include:

Greening brown winter grass (no cost to achieve)
Showing pools as open/filled during off-season photography (normal seasonal state)
Removing temporary items like trash cans or delivery boxes

Prohibited enhancements that imply costly improvements:

Adding landscaping, plantings, or hardscaping features
Digitally installing fire pits, or permanent fixtures
Creating the appearance of renovated outdoor spaces
Removing wires, gutter, pipes, mechanicals outside the house that are permanent

Prohibited Photo Manipulations

Structural Alterations Never digitally remove or add structural elements like walls, fixtures, or permanent features.

Virtual Staging Overreach While virtual staging can help buyers visualize spaces, Article 2 of the NAR Code of Ethics prohibits REALTORS from exaggerating, concealing or misrepresenting pertinent facts about a property.

Acceptable Virtual Staging:

Adding furniture to empty rooms to show scale and function
Basic décor and artwork within reasonable price ranges
Standard lighting and window treatments

Prohibited Virtual Elements:

High-end renovations or finishes not present (granite counters, hardwood floors)
Structural changes (removing walls, adding windows, expanding rooms)
Expensive built-ins, custom millwork, or luxury fixtures
Outdoor additions like decks, patios, or landscaping

AI Enhancement Risks Generative AI tools that significantly alter property appearance can create legal liability. Use AI tools cautiously and always disclose when images have been substantially enhanced.

AI “Cost Test” Applications:

Acceptable: Seasonal adjustments, cleaning up temporary clutter
Prohibited: Any AI-generated improvements that would require financial investment by the buyer to achieve

Photography Best Practices

Clear Disclosure: If photos are virtually staged or enhanced, clearly identify them as such. Most MLS require disclosure
Accurate Representation: Ensure photos reflect the property’s actual condition and features
Current Images: Use recent photos that reflect the property’s current state. For rentals or model units, note the distinctions.
Professional Standards: Work with photographers who understand real estate marketing ethics

State-Specific Considerations

Real estate laws vary significantly by state, making local knowledge essential for avoiding misrepresentation claims.

Some Disclosure Requirements by Region

California: Extensive disclosure requirements including natural hazard zones, Megan’s Law database proximity, and earthquake safety Florida: Sinkholes, flood zones, and hurricane impacts require specific disclosures Texas: Property condition, environmental hazards, and mineral rights disclosures New York: Lead paint, rent stabilization status, and building violations

Local Market Nuances

Urban vs. Rural Properties Property rights, zoning restrictions, and utility access can vary dramatically between urban and rural settings.

Historic Districts Properties in historic districts may have renovation restrictions that significantly impact value and usability.

Flood Zones FEMA flood zone designations change regularly. Always verify current flood zone status rather than relying on outdated information.

Technology Tools for Accuracy

MLS Verification Systems

Most MLS platforms now include data verification tools and automated accuracy checks. Use these features to catch potential errors before they become problems.

Property Information Services

Third-Party Verification Services like PropertyRadar, CoreLogic, and others provide independently verified property data that can serve as backup documentation. Many are integrated with the MLS platform already.

Government Database Integration Many areas now offer online access to building permits, tax records, and planning documents that can help verify property information.

Mobile Apps for Field Verification

Measurement Apps: Laser measurement apps like MagicPlan or RoomScan Pro can provide quick square footage verification but they are really meant for contractors. Professional measurement should still be obtained for final accuracy. Photographers usually offer floorplan services as part of a package.

Photo Organization: Apps like Timestamp Camera automatically timestamp and GPS-tag photos, providing documentation of property conditions and when they were observed.

Disclosure Management: Digital platforms like my favorite, dotloop, can help track required disclosures by state and locality, ensuring nothing is missed during the listing process.

Building Your Documentation Defense

Creating a paper trail isn’t just good business practice—it’s essential protection against misrepresentation claims.

Essential Documentation Checklist

[ ] Property survey (current within 5 years)
[ ] Tax Assessor Field Card
[ ] Recent appraisal or CMA supporting price
[ ] Building permit records for any renovations
[ ] HOA documents and fee schedules
[ ] Environmental disclosures and certifications
[ ] Source documentation for all MLS entries
[ ] Seller sign off on data input for the MLS
[ ] Photo metadata showing date and location

Communication Records

Email Trails: Keep records of all communications with sellers about property condition and features
Amendment Documentation: Document any changes or corrections to listing information
Buyer Interaction Records: Maintain records of what information was provided to potential buyers
Use a transaction management system

Working with Sellers: Setting Boundaries

Many misrepresentation issues can sometimes originate from seller pressure to emphasize positive features or downplay negatives.

Managing Seller Expectations

Education is Key: Help sellers understand that accurate representation protects everyone involved
Document Conversations: When sellers provide information about their property, confirm details in writing. Having sellers sign off on the MLS data or the listing itself is best practices
Set Clear Boundaries: Explain that you cannot and will not misrepresent property features, regardless of market pressure

When Sellers Push Back

Stand Firm: Your professional integrity and legal protection are non-negotiable

Provide Alternatives: Suggest legitimate ways to highlight property strengths without misrepresentation

Unpermitted Work: Help sellers obtain retroactive permits or certificates of occupancy before listing. Many municipalities offer amnesty programs for bringing work up to code.
Open Building Permits: Work with sellers to complete inspections and close outstanding permits, which often increases property value and buyer confidence.
Outdated Municipal Records: Assist sellers in updating tax assessor files, zoning records, and property descriptions with the city/county to reflect current conditions.
Missing Documentation: Connect sellers with professionals who can provide required certificates (septic inspections, well water testing, HVAC certifications).

Whenever possible, show sellers that you are a solution-oriented partner while maintaining your ethical standards as a good real estate agent.

Consider Termination: If a seller insists on misrepresentation, consider ending the relationship

Compliance with NAR Code of Ethics

NAR Code of Ethics states that REALTORS must present a true picture in their advertising and public representations, and all marketing materials must be honest and truthful.

Key Ethical Standards

Avoid exaggeration, misrepresentation, or concealment of pertinent facts
Ensure all advertising and marketing is truthful and not misleading
Cooperate with other REALTORS and provide accurate information in the MLS

High-Risk Scenarios

Properties with extensive undocumented renovations
Environmental concerns or contamination history
Boundary disputes or easement issues
Seller refusal to provide required disclosures

Early Warning Signs

Pressure from sellers to omit or minimize negative features
Conflicting information from different sources: When tax records, MLS history, builder plans, and seller representations don’t align, investigate immediately. Common conflicts include square footage discrepancies between appraisals and tax records, lot size variations between surveys and plat maps, or permit records that contradict seller claims about renovations.
Properties priced significantly above or below market without clear justification

Regulatory Developments

State licensing boards are increasingly focusing on technology-related misrepresentation issues. Stay informed about:

New disclosure requirements for digitally enhanced media
Evolving standards for virtual staging and AI enhancement
Updated MLS accuracy requirements and verification processes

Historical Disclosure Requirements Many states are expanding disclosure obligations to include events from previous ownership periods, recognizing that property history significantly impacts current value and insurability:

Insurance Claims History: States like California and Florida now require disclosure of significant insurance claims (fire, flood, structural damage) from previous owners, typically within 3-5 years, as these can affect future insurability and premiums.
Natural Disaster Impact: Even if current owners didn’t experience damage, previous flood zones, wildfire proximity, or hurricane damage may need disclosure based on CLUE (Comprehensive Loss Underwriting Exchange) reports and property history.
Environmental Remediation: Previous contamination issues, even if remediated before current ownership, may require ongoing disclosure in many jurisdictions.

Creating Your Misrepresentation Prevention System

Double-Check Everything: Verify all property information through multiple sources
Document Sources: Keep records of where information was obtained
Update Regularly: Review and update listings as new information becomes available
Use Transaction Management Platforms: Document and store everything in an easily accessible, shareable system with the latest state disclosure forms
Use the email covered under your E&O Insurance for ALL communications
Professional Development: Stay current on local laws and industry best practices

The Cost of Getting It Wrong

Beyond legal fees and potential damages, misrepresentation can destroy careers. Consider these consequences:

Financial Impact

Potential damages equal to transaction value or more
Increased errors and omissions insurance premiums
Lost future business and referrals

Professional Consequences

State licensing board investigations
NAR ethics violations and sanctions
Broker disciplinary actions
Reputation damage in local market

Building Client Trust Through Transparency

Being completely honest about property limitations builds stronger client relationships than overselling features.

Transparency Benefits

Fewer post-closing disputes
Stronger client referral relationships
Enhanced professional reputation
Reduced legal liability

Communication Strategies

Present challenges alongside solutions
Provide context for property features
Offer realistic market expectations
Document all communications

Conclusion: Your Professional Insurance Policy

Preventing misrepresentation isn’t just about following rules—it’s about building a career based on trust and professionalism. By implementing systematic verification processes, maintaining accurate documentation, and prioritizing transparency, you protect your clients and your own professional future. In an industry built on relationships and referrals, your reputation for honesty and accuracy is your most valuable asset.

Remember: when in doubt, verify. When you can’t verify, disclose your uncertainty. And when there is any pressure to misrepresent, stand firm. Your career and your clients depend on it.

For more real estate professional development resources, compliance training, and industry updates, visit the National Association of Realtors and your state’s real estate commission website. Always consult with a qualified real estate attorney for specific legal questions about your local market and circumstances.